USMEF sees challenges in first red meat export report of the year

Moving into 2013, the U.S. Meat Export Federation (USMEF) marked both good news and challenges for U.S. beef exports in the January 2013.

“Beef exports continued the trend shown in 2012, with higher export value on lower volumes,” said USMEF in a report.

Philip Seng, USMEF president and CEO, said, “The year ahead will offer no shortage of challenges to red meat exports, which will require our industry to be creative and aggressive.”

Export markets

 With increases in exports to Hong Kong, Canada and Taiwan, USMEF marked an increase in value of exports at 9.3 percent in January. The total volume of beef exports, however, dropped by 3.2 percent

USMEF also marked strength in Japanese markets as also contributing to increased value. However, maintaining market access has proven to be a problem. 

Seng added, “On the beef side, we are still dealing with market access barriers in Saudi Arabia and significant obstacles in Russia, but there are signs for optimism in the months ahead with expanded beef access to Japan and Hong Kong that will provide a boost.”

Exports will also be affected, he added, by the devaluation of the Japanese yen. Since last summer, the yen has fallen by about 20 percent in value as compared to the U.S. dollar.

By the numbers

In January, USMEF reported that U.S. beef exports totaled 86,608 metric tons, valued at $443.8 million. The drop in exports to Russia accounts for the decline in volume from January 2012.

Beef exports to Russia have fallen by 91.5 percent after the country delisted U.S. beef plants for detection of growth promotant residues.

Canada, however, showed up as the top volume and value buyer for U.S. beef, with 16,586 metric tons, up 32 percent from 2012, worth $102.9 million, an increase of 42 percent from a year ago.

On the Pacific Rim, beef purchases from Hong Kong increased by 144 percent in volume to 7,004 metric tons. The country sits at number six on the beef export list, with exports valued a $37.1 million, a 115 percent increase from a year ago.

Rising exports were also seen in Taiwan, with a 14.5 percent increase in volume and 39.7 percent increase in value to $22.6 million.

South Korea, however, imported a slightly lower volume of beef, but the value of their imports increased by 12.2 percent to $58.2 million.

“Anticipating the Feb. 1 expansion of the market to beef from cattle under 30 months of age, Japan increased its U.S. beef purchases 5.5 percent in volume and 21.6 percent in value to 10,217 metric tons valued at $72.5 million,” says USMEF.

At home

On the domestic front, CME Group notes that wholesale beef prices have struggled relative to expected levels so far this year. At the same time, however, retail prices for all meat remains strong.

“According to USDA’s monthly retail price data released on March 15, beef prices remain at or near record high,” comments CME Group.

In February, choice beef sold for an average of $5.22 per pound, which marks an increase of 3.5 percent over a year ago. However, the figure is down 2.2 cents per pound from January’s record high numbers.

Market drivers

CME Group also expects beef to be a key driver, if not the key driver, of the meat industry this year.

“Last summer’s and fall’s sharply lower placements of cattle into feedlots was, and still is, we think, expected to lead to sharply lower cattle slaughter and higher beef prices this year,” says CME Group.

They further add that while those high prices haven’t been seen yet, recent market trends suggest the best may be yet to come.

“Year-to-date cattle slaughter was down only 0.6 percent through Feb.2,” they add. “After last week (March 11-15), it is now down 2.4 percent.”

Additionally, while year-to-date steer and heifer slaughter was up by 0.5 percent as of Feb. 2, by March 3, the figure showed slaughter as down by two percent.

Declining slaughter

“Given total cattle slaughter that was down 5.9 percent and 1.9 percent year over year, the past two weeks, those figure for steers and heifers are likely to grow more negative,” CME Group adds.

As evidence of a likely trend in declining slaughter, CME Group marks a rally of beef cutout values for the beginning of March, where Choice beef saw increases of $10 per hundredweight the week of March 9.

“Some analysts believe two dollars per pound is a huge psychological barrier to this market, and the historical data support that point of view,” says CME Group. “How many people will pay retail beef prices commensurate with two dollar Choice beef? We think the answer to that is ‘Not as many as will buy cheaper beef but far more than zero!’”

They further add that the marketing window for cattle placed in September is only just approaching, and September showed the lowest number of placements last fall, meaning shorter supplies will continue to come. 

Cattle on Feed

Numbers for cattle on feed are also expected to decline by CME Group analysts.

After just one month of higher year-on-year numbers, placements, which were two percent larger than last year in January, are expected to again fall significantly short of year-ago levels,” comments GME Group.

Coupled with a predicted tight grain supply and potential for very high prices, they note that the decline isn’t unexpected. 

At the same time, CME Group also notes that the feed cattle supply is tight and small margins are available, meaning feeders will likely be very careful.

For February 2013, USDA daily slaughter estimates show 1.799 million head were harvested, a number that is 91.5 percent of year-ago levels. The estimate was 92.7 percent. 

“If the 93.5 percent average of the estimates for March 1 feedlot inventories is accurate, it would put inventories at 10.918 million head – 759,000 fewer than one year ago,” emphasizes CME Group. “That is the largest year-on-year decline recorded in this most recent reduction cycle.”

“Inventories were 738,000 lower on Feb. 1 and have been at least 635,000 smaller than one year earlier since November,” they add.

To see the U.S. Meat Export Federation’s complete meat export report, visit usmef.org.

Saige Albert, managing editor of the Wyoming Livestock Roundup, compiled this article. Send comments on this article to saige@wylr.net.